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ALLIANCEBERNSTEIN HOLDING L.P. - Quarter Report: 2021 September (Form 10-Q)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to
Commission File No.  001-09818
ALLIANCEBERNSTEIN HOLDING L.P.
(Exact name of registrant as specified in its charter)
Delaware13-3434400
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
501 Commerce Street, Nashville, TN 37203
(Address of principal executive offices)
(Zip Code)
(615) 622-0000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YesNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YesNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
Yes No






Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Units Rep. Assignments of Beneficial Ownership of LP Interests in AB Holding ("Units")ABNew York Stock Exchange
The number of units representing assignments of beneficial ownership of limited partnership interests outstanding as of September 30, 2021 was 98,754,148.*
*includes 100,000 units of general partnership interest having economic interests equivalent to the economic interests of the units representing assignments of beneficial ownership of limited partnership interests.



ALLIANCEBERNSTEIN HOLDING L.P.

Index to Form 10-Q
  Page
  
 Part I
  
 FINANCIAL INFORMATION
  
Item 1.
  
 
  
 
  
 
  
 
  
 
  
Item 2.
  
Item 3.
  
Item 4.
  
 Part II
  
 OTHER INFORMATION
  
Item 1.
  
Item 1A.
  
Item 2.
  
Item 3.
  
Item 4.
  
Item 5.
  
Item 6.
  



Index
Part I

FINANCIAL INFORMATION

Item 1.    Financial Statements

ALLIANCEBERNSTEIN HOLDING L.P.
Condensed Statements of Financial Condition
(in thousands, except unit amounts)
(unaudited)
September 30,
2021
December 31,
2020
ASSETS
Investment in AB$1,550,187 $1,605,941 
Other assets— 92 
Total assets$1,550,187 $1,606,033 
LIABILITIES AND PARTNERS’ CAPITAL
Liabilities:
Other liabilities$528 $1,876 
Total liabilities528 1,876 
Commitments and contingencies (See Note 8)
Partners’ capital:
General Partner: 100,000 general partnership units issued and outstanding
1,402 1,410 
Limited partners: 98,654,148 and 98,222,942 limited partnership units issued and outstanding
1,634,619 1,656,816 
AB Holding Units held by AB to fund long-term incentive compensation plans(47,459)(20,171)
Accumulated other comprehensive loss(38,903)(33,898)
Total partners’ capital1,549,659 1,604,157 
Total liabilities and partners’ capital$1,550,187 $1,606,033 

See Accompanying Notes to Condensed Financial Statements.

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ALLIANCEBERNSTEIN HOLDING L.P.
Condensed Statements of Income
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Equity in net income attributable to AB Unitholders$95,921 $73,874 $282,235 $206,989 
Income taxes7,245 6,875 21,555 20,805 
Net income$88,676 $66,999 $260,680 $186,184 
Net income per unit:
Basic$0.89 $0.70 $2.61 $1.95 
Diluted$0.89 $0.70 $2.61 $1.95 

See Accompanying Notes to Condensed Financial Statements.

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ALLIANCEBERNSTEIN HOLDING L.P.
Condensed Statements of Comprehensive Income
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$88,676 $66,999 $260,680 $186,184 
Other comprehensive income (loss):
Foreign currency translation adjustments, before tax(3,379)5,872 (5,302)718 
Income tax benefit99 38 90 116 
Foreign currency translation adjustments, net of tax(3,280)5,910 (5,212)834 
Changes in employee benefit related items:  
Amortization of prior service cost10 
Recognized actuarial gain264 149 202 613 
Changes in employee benefit related items268 152 208 623 
Income tax (expense)(2)(1)(1)(31)
Employee benefit related items, net of tax266 151 207 592 
Other comprehensive (loss) income(3,014)6,061 (5,005)1,426 
Comprehensive income$85,662 $73,060 $255,675 $187,610 

See Accompanying Notes to Condensed Financial Statements.
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ALLIANCEBERNSTEIN HOLDING L.P.
Condensed Statements of Changes in Partners’ Capital
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
General Partner’s Capital
Balance, beginning of period$1,403 $1,374 $1,410 $1,402 
Net income89 71 260 192 
Cash distributions to Unitholders(90)(61)(268)(210)
Balance, end of period1,402 1,384 1,402 1,384 
Limited Partners’ Capital   
Balance, beginning of period1,689,671 1,556,813 1,656,816 1,619,200 
Net income88,587 66,928 260,420 185,992 
Cash distributions to Unitholders(90,478)(58,877)(269,608)(204,258)
Retirement of AB Holding Units(54,235)(8,645)(124,923)(54,823)
Issuance of AB Holding Units to fund long-term incentive compensation plan awards1,074 282 108,512 10,243 
Exercise of compensatory options to buy AB Holding Units— — 3,402 147 
Balance, end of period1,634,619 1,556,501 1,634,619 1,556,501 
AB Holding Units held by AB to fund long-term incentive compensation plans  
Balance, beginning of period(50,989)(26,202)(20,171)(27,436)
Change in AB Holding Units held by AB to fund long-term incentive compensation plans3,530 3,511 (27,288)4,745 
Balance, end of period(47,459)(22,691)(47,459)(22,691)
Accumulated Other Comprehensive (Loss) Income    
Balance, beginning of period(35,889)(45,263)(33,898)(40,628)
Foreign currency translation adjustment, net of tax(3,280)5,910 (5,212)834 
Changes in employee benefit related items, net of tax266 151 207 592 
Balance, end of period(38,903)(39,202)(38,903)(39,202)
Total Partners’ Capital$1,549,659 $1,495,992 $1,549,659 $1,495,992 

See Accompanying Notes to Condensed Financial Statements.

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ALLIANCEBERNSTEIN HOLDING L.P.
Condensed Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20212020
Cash flows from operating activities:
Net income$260,680 $186,184 
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net income attributable to AB Unitholders(282,235)(206,989)
Cash distributions received from AB290,773 225,802 
Changes in assets and liabilities:
Decrease (increase) in other assets92 (60)
(Decrease) in other liabilities(1,348)(1,334)
Net cash provided by operating activities267,962 203,603 
Cash flows from investing activities:
Investments in AB with proceeds from exercise of compensatory options to buy AB Holding Units
(3,402)(147)
Net cash used in investing activities(3,402)(147)
Cash flows from financing activities:
Cash distributions to Unitholders(269,876)(204,468)
Capital contributions from AB1,914 865 
Proceeds from exercise of compensatory options to buy AB Holding Units3,402 147 
Net cash used in financing activities(264,560)(203,456)
Change in cash and cash equivalents  
Cash and cash equivalents as of beginning of period— — 
Cash and cash equivalents as of end of period$ $ 

See Accompanying Notes to Condensed Financial Statements.

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ALLIANCEBERNSTEIN HOLDING L.P.
Notes to Condensed Financial Statements
September 30, 2021
(unaudited)

The words “we” and “our” refer collectively to AllianceBernstein Holding L.P. (“AB Holding”) and AllianceBernstein L.P.  and its subsidiaries (“AB”), or to their officers and employees. Similarly, the word “company” refers to both AB Holding and AB. Where the context requires distinguishing between AB Holding and AB, we identify which of them is being discussed. These statements should be read in conjunction with the audited consolidated financial statements included in the Form 10-K for the year ended December 31, 2020.

1.    Business Description, Organization and Basis of Presentation

Business Description

AB Holding’s principal source of income and cash flow is attributable to its investment in AB limited partnership interests. The condensed financial statements and notes of AB Holding should be read in conjunction with the condensed consolidated financial statements and notes of AB included as an exhibit to this quarterly report on Form 10-Q and with AB Holding’s and AB’s audited financial statements included in AB Holding’s Form 10-K for the year ended December 31, 2020.

AB provides diversified investment management, research and related services globally to a broad range of clients. Its principal services include:

Institutional Services – servicing its institutional clients, including private and public pension plans, foundations and endowments, insurance companies, central banks and governments worldwide, and affiliates such as Equitable Holdings, Inc. ("EQH") and its subsidiaries, by means of separately-managed accounts, sub-advisory relationships, structured products, collective investment trusts, mutual funds, hedge funds and other investment vehicles.

Retail Services – servicing its retail clients, primarily by means of retail mutual funds sponsored by AB or an affiliated company, sub-advisory relationships with mutual funds sponsored by third parties, separately-managed account programs sponsored by financial intermediaries worldwide and other investment vehicles.

Private Wealth Management Services – servicing its private clients, including high-net-worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations, and other entities, by means of separately-managed accounts, hedge funds, mutual funds and other investment vehicles.

Bernstein Research Services – servicing institutional investors, such as pension fund, hedge fund and mutual fund managers, seeking high-quality fundamental research, quantitative services and brokerage-related services in equities and listed options.

AB also provides distribution, shareholder servicing, transfer agency services and administrative services to the mutual funds it sponsors.

AB’s high-quality, in-depth research is the foundation of its business. AB’s research disciplines include economic, fundamental equity, fixed income and quantitative research. In addition, AB has expertise in multi-asset strategies, wealth management, environmental, social and corporate governance ("ESG"), and alternative investments.

AB provides a broad range of investment services with expertise in:

Actively-managed equity strategies, with global and regional portfolios across capitalization ranges, concentration ranges and investment strategies, including value, growth and core equities;

Actively-managed traditional and unconstrained fixed income strategies, including taxable and tax-exempt strategies;

Alternative investments, including hedge funds, fund of funds, direct lending and private equity;

Multi-asset solutions and services, including dynamic asset allocation, customized target-date funds and target-risk funds; and
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Some passive management, including index and enhanced index strategies.

Organization

As of September 30, 2021, EQH owned approximately 4.1% of the issued and outstanding units representing assignments of beneficial ownership of limited partnership interests in AB Holding (“AB Holding Units”). AllianceBernstein Corporation (an indirect wholly-owned subsidiary of EQH, “General Partner”) is the general partner of both AB Holding and AB. AllianceBernstein Corporation owns 100,000 general partnership units in AB Holding and a 1% general partnership interest in AB.

As of September 30, 2021, the ownership structure of AB, expressed as a percentage of general and limited partnership interests, was as follows:
EQH and its subsidiaries63.2 %
AB Holding36.1 
Unaffiliated holders0.7 
100.0 %

Including both the general partnership and limited partnership interests in AB Holding and AB, EQH and its subsidiaries had an approximate 64.7% economic interest in AB as of September 30, 2021.

Basis of Presentation

The interim condensed financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the interim results, have been made. The preparation of the condensed financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed financial statements and the reported amounts of revenues and expenses during the interim reporting periods. Actual results could differ from those estimates. The condensed statement of financial condition as of December 31, 2020 was derived from audited financial statements. Certain disclosures included in the annual financial statements have been condensed or omitted from these financial statements as they are not required for interim financial statements under principles generally accepted in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission.

AB Holding records its investment in AB using the equity method of accounting. AB Holding’s investment is increased to reflect its proportionate share of income of AB and decreased to reflect its proportionate share of losses of AB and cash distributions made by AB to its Unitholders. In addition, AB Holding's investment is adjusted to reflect its proportionate share of certain capital transactions of AB.

Subsequent Events
We have evaluated subsequent events through the date that these financial statements were filed with the Securities and Exchange Commission and there were no events requiring disclosure.


2.    Cash Distributions

AB Holding is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of Limited Partnership of AB Holding (“AB Holding Partnership Agreement”), to its Unitholders pro rata in accordance with their percentage interests in AB Holding. Available Cash Flow is defined as the cash distributions AB Holding receives from AB minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB Holding for use in its business (such as the payment of taxes) or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow.

On October 28, 2021, the General Partner declared a distribution of $0.89 per unit, representing a distribution of Available Cash Flow for the three months ended September 30, 2021. Each general partnership unit in AB Holding is entitled to
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receive distributions equal to those received by each AB Holding Unit. The distribution is payable on November 24, 2021 to holders of record at the close of business on November 8, 2021.
3.    Long-term Incentive Compensation Plans

AB maintains several unfunded, non-qualified long-term incentive compensation plans, under which the company grants awards of restricted AB Holding Units to its employees and members of the Board of Directors, who are not employed by AB or by any of AB’s affiliates (“Eligible Directors”).

AB funds its restricted AB Holding Unit awards either by purchasing AB Holding Units on the open market or purchasing newly-issued AB Holding Units from AB Holding, and then keeping these AB Holding Units in a consolidated rabbi trust until delivering them or retiring them. In accordance with the AB Holding Partnership Agreement, when AB purchases newly-issued AB Holding Units from AB Holding, AB Holding is required to use the proceeds it receives from AB to purchase the equivalent number of newly-issued AB Units, thus increasing its percentage ownership interest in AB. AB Holding Units held in the consolidated rabbi trust are corporate assets in the name of the trust and are available to the general creditors of AB.

Repurchases of AB Holding Units for the three and nine months ended September 30, 2021 and 2020 consisted of the following:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in millions)
Total amount of AB Holding Units Purchased (1)
1.0 0.3 2.9 2.5 
Total Cash Paid for AB Holding Units Purchased(1)
$50.0 $6.8 $125.7 $54.4 
Open Market Purchases of AB Holding Units Purchased (2)
0.9 0.2 2.3 2.4 
Total Cash Paid for Open Market Purchases of AB Holding Units (2)
$44.9 $6.7 $103.7 $51.8 
(1) Purchased on a trade date basis.
(2) The remainder related to purchases of AB Holding Units from employees to fulfill statutory tax withholding requirements at the time of delivery of long-term incentive compensation awards.
Each quarter, AB considers whether to implement a plan to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (“Exchange Act”). A plan of this type allows a company to repurchase its shares at times when it otherwise might be prevented from doing so because of self-imposed trading blackout periods or because it possesses material non-public information. Each broker selected by AB has the authority under the terms and limitations specified in the plan to repurchase AB Holding Units on AB’s behalf. Repurchases are subject to regulations promulgated by the SEC as well as certain price, market volume and timing constraints specified in the plan. The plan adopted during the third quarter of 2021 expired at the close of business on October 27, 2021. AB may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under its incentive compensation award program and for other corporate purposes.

During the first nine months of 2021 and 2020, AB awarded to employees and Eligible Directors 3.6 million and 0.5 million restricted AB Holding Unit awards, respectively. AB used AB Holding Units repurchased during the applicable period and newly-issued AB Holding Units to fund these restricted AB Holding Unit awards.

During the first nine months of 2021 and 2020, AB Holding issued 0.1 million and 5,182 AB Holding Units, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $3.4 million and $0.1 million, respectively, received from award recipients as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units.        
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4.    Net Income per Unit

Basic net income per unit is derived by dividing net income by the basic weighted average number of units outstanding for each period. Diluted net income per unit is derived by adjusting net income for the assumed dilutive effect of compensatory options (“Net income – diluted”) and dividing by the diluted weighted average number of units outstanding for each period.

 Three Months Ended September 30,Nine Months Ended
September 30,
 2021202020212020
 (in thousands, except per unit amounts)
Net income – basic$88,676 $66,999 $260,680 $186,184 
Additional allocation of equity in net income attributable to AB resulting from assumed dilutive effect of compensatory options
14 26 32 
Net income – diluted$88,678 $67,013 $260,706 $186,216 
Weighted average units outstanding – basic99,410 96,350 99,903 95,415 
Dilutive effect of compensatory options27 14 23 
Weighted average units outstanding – diluted99,413 96,377 99,917 95,438 
Basic net income per unit$0.89 $0.70 $2.61 $1.95 
Diluted net income per unit$0.89 $0.70 $2.61 $1.95 

Three Months Ended September 30,Nine Months Ended
September 30,
2021202020212020
(amounts as shown)
Anti-dilutive options excluded from diluted net income— 29,056 — 29,056 

5.    Investment in AB

Changes in AB Holding’s investment in AB during the nine-month period ended September 30, 2021 are as follows (in thousands):

Investment in AB as of December 31, 2020$1,605,941 
Equity in net income attributable to AB Unitholders282,235 
Changes in accumulated other comprehensive income(5,005)
Cash distributions received from AB(290,773)
Additional investments with proceeds from exercise of compensatory options to buy AB Holding Units3,402 
Capital contributions (from) AB(1,914)
AB Holding Units retired(124,923)
AB Holding Units issued to fund long-term incentive compensation plans108,512 
Change in AB Holding Units held by AB for long-term incentive compensation plans(27,288)
Investment in AB as of September 30, 2021$1,550,187 








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6.    Units Outstanding

Changes in AB Holding Units outstanding during the nine-month period ended September 30, 2021 are as follows:
Outstanding as of December 31, 202098,322,942 
Options exercised143,211 
Units issued3,041,072 
Units retired(2,753,077)
Outstanding as of September 30, 202198,754,148 

7.    Income Taxes

AB Holding is a “grandfathered” publicly-traded partnership (“PTP”) for federal tax purposes and, accordingly, is not subject to federal or state corporate income taxes. However, AB Holding is subject to the 4.0% New York City unincorporated business tax (“UBT”), net of credits for UBT paid by AB, and to a 3.5% federal tax on partnership gross income from the active conduct of a trade or business. AB Holding’s partnership gross income is derived from its interest in AB.

AB Holding’s federal income tax is computed by multiplying certain AB qualifying revenues (primarily U.S. investment advisory fees, research payments and brokerage commissions) by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate. AB Holding Units in AB’s consolidated rabbi trust are not considered outstanding for purposes of calculating AB Holding’s ownership interest in AB.

Three Months Ended September 30,Nine Months Ended
September 30,
20212020% Change20212020% Change
(in thousands)
Net income attributable to AB Unitholders$264,695 $207,976 27.3 %$776,396 $579,617 33.9 %
Multiplied by: weighted average equity ownership interest36.2 %35.5 %36.4 %35.7 %
Equity in net income attributable to AB Unitholders$95,921 $73,874 29.8 $282,235 $206,989 36.4 
AB qualifying revenues$669,232 $642,303 4.2 $1,956,095 $1,931,252 1.3 
Multiplied by: weighted average equity ownership interest for calculating tax
30.2 %30.0 %30.6 %30.2 %
Multiplied by: federal tax3.5 %3.5 %3.5 %3.5 %
Federal income taxes7,073 6,738 20,977 20,432 
State income taxes172 137 578 373 
Total income taxes$7,245 $6,875 5.4 $21,555 $20,805 3.6 
Effective tax rate7.6 %9.3 %7.6 %10.1 %

In order to preserve AB Holding’s status as a “grandfathered” PTP for federal income tax purposes, management ensures that AB Holding does not directly or indirectly (through AB) engage in a substantial new line of business. If AB Holding were to lose its status as a “grandfathered” PTP, it would be subject to corporate income tax, which would reduce materially AB Holding’s net income and its quarterly distributions to AB Holding Unitholders.
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8.    Commitments and Contingencies

Legal and regulatory matters described below pertain to AB and are included here due to their potential significance to AB Holding's investment in AB.

With respect to all significant litigation matters, we consider the likelihood of a negative outcome. If we determine the likelihood of a negative outcome is probable and the amount of the loss can be reasonably estimated, we record an estimated loss for the expected outcome of the litigation. If the likelihood of a negative outcome is reasonably possible and we can determine an estimate of the possible loss or range of loss in excess of amounts already accrued, if any, we disclose that fact together with the estimate of the possible loss or range of loss. However, it is often difficult to predict the outcome or estimate a possible loss or range of loss because litigation is subject to inherent uncertainties, particularly when plaintiffs allege substantial or indeterminate damages. Such is also the case when the litigation is in its early stages or when the litigation is highly complex or broad in scope. In these cases, we disclose that we are unable to predict the outcome or estimate a possible loss or range of loss.

AB may be involved in various matters, including regulatory inquiries, administrative proceedings and litigation, some of which may allege significant damages. It is reasonably possible that AB could incur losses pertaining to these matters, but management cannot currently estimate any such losses.

Management, after consultation with legal counsel, currently believes that the outcome of any individual matter that is pending or threatened, or all of them combined, will not have a material adverse effect on our results of operations, financial condition or liquidity. However, any inquiry, proceeding or litigation has the element of uncertainty; management cannot determine whether further developments relating to any individual matter that is pending or threatened, or all of them combined, will have a material adverse effect on our results of operations, financial condition or liquidity in any future reporting period.

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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

AB Holding’s principal source of income and cash flow is attributable to its investment in AB Units. AB Holding’s interim condensed financial statements and notes and management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with those of AB included as an exhibit to this Form 10-Q. They also should be read in conjunction with AB’s audited financial statements and notes and MD&A included in AB Holding’s Form 10-K for the year ended December 31, 2020.

Results of Operations
Three Months Ended September 30,Nine Months Ended September 30,
20212020% Change20212020% Change
(in thousands, except per unit amounts)
Net income attributable to AB Unitholders$264,695 $207,976 27.3 %$776,396 $579,617 33.9 %
Weighted average equity ownership interest36.2 %35.5 %36.4 %35.7 %
Equity in net income attributable to AB Unitholders95,921 73,874 29.8 282,235 206,989 36.4 
Income taxes7,245 6,875 5.4 21,555 20,805 3.6 
Net income of AB Holding$88,676 $66,999 32.4 $260,680 $186,184 40.0 
Diluted net income per AB Holding Unit$0.89 $0.70 27.1 $2.61 $1.95 33.8 
Distribution per AB Holding Unit(1)
$0.89 $0.69 29.0 $2.61 $1.94 34.5 
________________________
(1)Distributions reflect the impact of AB’s non-GAAP adjustments.

AB Holding's net income for the three and nine months ended September 30, 2021 increased $21.7 million and $74.5 million, respectively, due to higher net income attributable to AB Unitholders and a slightly higher weighted average equity ownership interest.

AB Holding’s partnership gross income is derived from its interest in AB. AB Holding’s income taxes, which reflect a 3.5% federal tax on its partnership gross income from the active conduct of a trade or business, are computed by multiplying certain AB qualifying revenues (primarily U.S. investment advisory fees, research payments and brokerage commissions) by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate. AB Holding’s effective tax rate was 7.6% during the three months ended September 30, 2021, compared to 9.3% during the three months ended September 30, 2020. AB Holding's effective tax rate during the nine months ended September 30, 2021 was 7.6% compared to 10.1% during the nine months ended September 30, 2020. See Note 7 to the condensed financial statements in Item 1 for the calculation of income tax expense.

Management Operating Metrics

As supplemental information, AB provides the performance measures “adjusted net revenues,” “adjusted operating income” and “adjusted operating margin,” which are the principal metrics management uses in evaluating and comparing the period-to-period operating performance of AB. Management principally uses these metrics in evaluating performance because they present a clearer picture of AB's operating performance and allow management to see long-term trends without the distortion primarily caused by long-term incentive compensation-related mark-to-market adjustments, real estate charges and other adjustment items. Similarly, management believes that these management operating metrics help investors better understand the underlying trends in AB's results and, accordingly, provide a valuable perspective for investors. Such measures are not based on generally accepted accounting principles (“non-GAAP measures”). These non-GAAP measures are provided in addition to, and not as substitutes for, net revenues, operating income and operating margin, and they may not be comparable to non-GAAP measures presented by other companies. Management uses both GAAP and non-GAAP measures in evaluating the company’s financial performance. The non-GAAP measures alone may pose limitations because they do not include all of AB’s revenues and expenses. Further, adjusted diluted net income per AB Holding Unit is not a liquidity measure and should not be used in place of cash flow measures. See AB’s MD&A contained in Exhibit 99.1.

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The impact of these adjustments on AB Holding’s net income and diluted net income per AB Holding Unit is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(in thousands, except per Unit amounts)
AB non-GAAP adjustments, before taxes$(8)$(840)$(1,702)$7,262 
AB income tax (expense) benefit on non-GAAP adjustments(56)29 239 (584)
AB non-GAAP adjustments, after taxes(64)(811)(1,463)6,678 
AB Holding’s weighted average equity ownership interest in AB36.2 %35.5 %36.4 %35.7 %
Impact on AB Holding’s net income of AB non-GAAP adjustments$(23)$(289)$(532)$2,385 
Net income – diluted, GAAP basis$88,678 $67,013 $260,706 $186,216 
Impact on AB Holding’s net income of AB non-GAAP adjustments(23)(289)(532)2,385 
Adjusted net income – diluted$88,655 $66,724 $260,174 $188,601 
Diluted net income per AB Holding Unit, GAAP basis$0.89 $0.70 $2.61 $1.95 
Impact of AB non-GAAP adjustments— (0.01)(0.01)0.03 
Adjusted diluted net income per AB Holding Unit$0.89 $0.69 $2.60 $1.98 

The degree to which AB's non-GAAP adjustments impact AB Holding's net income fluctuates based on AB Holding's ownership percentage in AB.

Cash Distributions

AB Holding is required to distribute all of its Available Cash Flow, as defined in the AB Holding Partnership Agreement, to its Unitholders (including the General Partner). Available Cash Flow typically is the adjusted diluted net income per unit for the quarter multiplied by the number of units outstanding at the end of the quarter. Management anticipates that Available Cash Flow will continue to be based on adjusted diluted net income per unit, unless management determines, with concurrence of the Board of Directors, that one or more adjustments made to adjusted net income should not be made with respect to the Available Cash Flow calculation. See Note 2 to the condensed financial statements in Item 1 for a description of Available Cash Flow.

Capital Resources and Liquidity

During the nine months ended September 30, 2021, net cash provided by operating activities was $268.0 million, compared to $203.6 million during the corresponding 2020 period. The increase primarily resulted from higher cash distributions received from AB of $65.0 million.

During the nine months ended September 30, 2021, net cash used in investing activities was $3.4 million, compared to $0.1 million during the corresponding 2020 period. The activity in both periods reflects the investments in AB with proceeds from exercises of compensatory options to buy AB Holding Units.

During the nine months ended September 30, 2021, net cash used in financing activities was $264.6 million, compared to $203.5 million during the corresponding 2020 period. The increase was primarily due to higher cash distributions to Unitholders of $65.4 million.

Management believes that AB Holding will have the resources it needs to meet its financial obligations as a result of the cash flow AB Holding realizes from its investment in AB.

Commitments and Contingencies

See Note 8 to the condensed financial statements in Item 1.

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CAUTIONS REGARDING FORWARD-LOOKING STATEMENTS

Certain statements provided by management in this report and in the portion of AB’s Form 10-Q attached hereto as Exhibit 99.1 are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The most significant of these factors include, but are not limited to, the following: the performance of financial markets, the investment performance of sponsored investment products and separately-managed accounts, general economic conditions, industry trends, future acquisitions, integration of acquired companies, competitive conditions and government regulations, including changes in tax regulations and rates and the manner in which the earnings of publicly-traded partnerships are taxed. We caution readers to carefully consider such factors. Further, these forward-looking statements speak only as of the date on which such statements are made; we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. For further information regarding these forward-looking statements and the factors that could cause actual results to differ, see “Risk Factors” in Part I, Item 1A of our Form 10-K for the year ended December 31, 2020 and Part II, Item 1A in this Form 10-Q. Any or all of the forward-looking statements that we make in our Form 10-K, this Form 10-Q, other documents we file with or furnish to the SEC, and any other public statements we issue, may turn out to be wrong. It is important to remember that other factors besides those listed in “Risk Factors” and those listed below could also adversely impact our revenues, financial condition, results of operations and business prospects.

The forward-looking statements referred to in the preceding paragraph, most of which directly affect AB but also affect AB Holding because AB Holding’s principal source of income and cash flow is attributable to its investment in AB, include statements regarding:

Our belief that the cash flow AB Holding realizes from its investment in AB will provide AB Holding with the resources it needs to meet its financial obligations: AB Holding’s cash flow is dependent on the quarterly cash distributions it receives from AB. Accordingly, AB Holding’s ability to meet its financial obligations is dependent on AB’s cash flow from its operations, which is subject to the performance of the capital markets and other factors beyond our control.

Our financial condition and ability to access the public and private capital markets providing adequate liquidity for our general business needs: Our financial condition is dependent on our cash flow from operations, which is subject to the performance of the capital markets, our ability to maintain and grow client assets under management and other factors beyond our control. Our ability to access public and private capital markets on reasonable terms may be limited by adverse market conditions, our firm’s credit ratings, our profitability and changes in government regulations, including tax rates and interest rates.

The outcome of litigation: Litigation is inherently unpredictable, and excessive damage awards do occur. Though we have stated that we do not expect any pending legal proceedings to have a material adverse effect on our results of operations, financial condition or liquidity, any settlement or judgment with respect to a legal proceeding could be significant and could have such an effect.

The possibility that we will engage in open market purchases of AB Holding Units to help fund anticipated obligations under our incentive compensation award program: The number of AB Holding Units AB may decide to buy in future periods, if any, to help fund incentive compensation awards depends on various factors, some of which are beyond our control, including the fluctuation in the price of an AB Holding Unit (NYSE: AB) and the availability of cash to make these purchases.

Our determination that adjusted employee compensation expense should not exceed 50% of our adjusted net revenues:  Aggregate employee compensation reflects employee performance and competitive compensation levels.  Fluctuations in our revenues and/or changes in competitive compensation levels could result in adjusted employee compensation expense exceeding 50% of our adjusted net revenues.
Our Relocation Strategy: While the expenses, expense savings and EPU impact we expect will result from our Relocation Strategy are presented with numerical specificity, and we believe these figures to be reasonable as of the date of this report, the uncertainties surrounding the assumptions on which our estimates are based create a significant risk that our current estimates may not be realized. These assumptions include:

the amount and timing of employee relocation costs, severance and overlapping compensation and occupancy costs we experience; and
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the timing for execution of each phase of our relocation implementation plan.
The Adverse Impact of COVID-19: The severity of any possible adverse impact on our AUM and revenues of any new economic downturn caused by a possible resurgence of the COVID-19 pandemic would depend on the depth and length of any such downturn and its impact on the companies in which we invest. Our conclusions about the possible adverse impact on us are based on our assumptions that the recovery from any such possible new economic downturn would be gradual and that there could again be significant, lasting high unemployment and economic damage. We believe that these assumptions are reasonable, but they may not be correct and economic conditions likely will differ from our assumptions.
Item 3.    Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in AB Holding’s market risk from the information provided under “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of AB Holding's Form 10-K for the year ended December 31, 2020.

Item 4.    Controls and Procedures

Disclosure Controls and Procedures

Each of AB Holding and AB maintains a system of disclosure controls and procedures that is designed to ensure that information required to be disclosed in our reports under the Exchange Act is (i) recorded, processed, summarized and reported in a timely manner, and (ii) accumulated and communicated to management, including the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), to permit timely decisions regarding our disclosure.

As of the end of the period covered by this report, management carried out an evaluation, under the supervision and with the participation of the CEO and the CFO, of the effectiveness of the design and operation of the disclosure controls and procedures. Based on this evaluation, the CEO and the CFO concluded that the disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the third quarter of 2021 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II

OTHER INFORMATION

Item 1.    Legal Proceedings

See Note 8 to the condensed financial statements contained in Part I, Item 1.

Item 1A.    Risk Factors

On September 10, 2021, Senate Finance Committee Chair Ron Wyden released draft legislation that would make significant changes to the current partnership tax rules. While it is highly uncertain whether the draft legislation will become law, if the draft legislation were to be enacted in its current form AB Holding would lose its status as a “grandfathered” PTP and become subject to federal and state corporate income tax and pay significantly more federal and state corporate income tax. See Part 1, Item 1A "Risk Factors" in our Annual Report on Form 10-K ("AB 10-K") for the fiscal year ended December 31, 2020 for further details surrounding changes in the tax law governing partnerships.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

There were no AB Holding Units sold by AB Holding in the period covered by this report that were not registered under the Securities Act.

Each quarter, since the third quarter of 2011, AB has implemented plans to repurchase AB Holding Units pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. The plan adopted during the third quarter of 2021 expired at the close of business on October 27, 2021. AB may adopt additional plans in the future to engage in open-market purchases of AB Holding Units to help fund anticipated obligations under the firm's incentive compensation award program and for other corporate purposes. See Note 3 to the condensed financial statements contained in Part 1, Item 1.

AB Holding Units bought by us or one of our affiliates during the third quarter of 2021 are as follows:

ISSUER PURCHASES OF EQUITY SECURITIES
PeriodTotal Number
of AB Holding Units
Purchased
Average Price
Paid Per
AB Holding Unit, net of
Commissions
Total Number of
AB Holding Units Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value) of
AB Holding Units that May Yet
Be Purchased Under
the Plans or
Programs
7/1/21 - 7/31/21(1)(2)
151,539 $45.88 — — 
8/1/21 - 8/31/21(2)
339,562 50.54 — — 
9/1/21 - 9/30/21(1)(2)
510,835 50.79 — — 
Total1,001,936 $49.96   

(1)During the third quarter of 2021, AB purchased from employees 109,285 AB Holding Units to allow them to fulfill statutory withholding tax requirements at the time of distribution of long-term incentive compensation awards.
(2)During the third quarter of 2021, AB purchased 892,651 AB Holding Units on the open market pursuant to a Rule 10b5-1 plan to help fund anticipated obligations under our incentive compensation award program.

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AB Units bought by us or one of our affiliates during the third quarter of 2021 are as follows:

ISSUER PURCHASES OF EQUITY SECURITIES
 
PeriodTotal Number
of AB Units
Purchased
Average Price
Paid Per
AB Unit, net of
Commissions
Total Number of
AB Units Purchased as
Part of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value) of
AB Units that May Yet
Be Purchased Under
the Plans or
Programs
7/1/21 - 7/31/21— $— — — 
8/1/21 - 8/31/21— — — — 
9/1/21 - 9/30/21(1)
4,000 51.58 — — 
Total4,000 $51.58   

(1)During September 2021, AB purchased 4,000 AB Units in private transactions.

Item 3.    Defaults Upon Senior Securities

None.

Item 4.    Mine Safety Disclosures

None.

Item 5.    Other Information

None.
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Item 6.    Exhibits
31.1
  
31.2
32.1
  
32.2
99.1
  
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
  
101.SCHXBRL Taxonomy Extension Schema.
  
101.CALXBRL Taxonomy Extension Calculation Linkbase.
  
101.LABXBRL Taxonomy Extension Label Linkbase.
  
101.PREXBRL Taxonomy Extension Presentation Linkbase.
101.DEFXBRL Taxonomy Extension Definition Linkbase.
104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in Inline XBRL (included in Exhibit 101).


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 28, 2021ALLIANCEBERNSTEIN HOLDING L.P.
By:/s/ Ali Dibadj
Ali Dibadj
Chief Financial Officer & Head of Strategy
By:/s/ William R. Siemers
William R. Siemers
Chief Accounting Officer
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